Fears of an imminent recession have reached a fever pitch this year, with everyone from Wall Street market strategists to company CEOs warnings of a slowdown in the US economy.
But according to Bank of America, there are plenty of signals that suggest a recession has not been avoided. These are the 12 charts that indicate the US is on the verge of entering a full-blown recession, according to Bank of America’s Michael Hartnett.
1. A decline in manufacturing activity
Bank of America
“March ISM was 46.3, lowest since May 2020. In past 70 years whenever manufacturing ISM dropped below 45, recession occurred on 11 out of 12 occasions (exception was 1967),” BofA said.
2. A decline in manufacturing often coincides with lower earnings
Bank of America
“New orders component of manufacturing ISM at 44.3. New orders < 45 have coincided with EPS recessions (see 1991, 2001, 2008, 2020),” BofA said.
3. Global earnings model suggests imminent decline
Bank of America
“BofA Global EPS Growth Model currently predicts EPS to fall -16% year-over-year by August. Model is driven by Asian exports, global PMIs, China financial conditions, US yield curve,” BofA said.
4. Steepening yield curve often precedes a recession
Bank of America
“US Treasury 2-year/10-year yield curve flattens and inverts in anticipation of recession. Yield curves steepen immediately as recessions begin. US Treasury 2-year/10-year yield curve has steepened from -110 basis points to -50 basis points in past 4 weeks,” BofA said.
5. Price of oil showing concerns of a recession
Bank of America
“Oil prices historically rise into recessions and decline during recessions. Latest OPEC+ output cuts underscore recession concerns, with limited upward pricing pressures from China reopening so far,” BofA said.
6. The jobs market often follows manufacturing activity
Bank of America
“Weak ISM manufacturing PMI suggests US labor market will weaken next few months,” BofA said, adding that it viewed the February and March jobs report as “the last strong payroll reports of 2023.”
7. Global home prices are falling
Bank of America
“Global house prices turning negative as higher rates hit real estate in US, UK, Canada, Sweden, Australia, and New Zealand,” BofA said.
8. A credit crunch will hurt the jobs market
Bank of America
“US banks have been tightening lending standards to small companies past few quarters. Credit crunch to intensify and highly correlated with small business demand for workers. Should May SLOOS report show drop in loan availability to -10 or below = unambiguous credit crunch,” BofA said.
9. A decline in European bank lending
Bank of America
“Bank lending in Eurozone down three months in a row (very rare outside Great Financial Crisis, Euro debt crisis, COVID). $14 trillion Eurozone economy highly dependent on bank credit,” BofA said.
10. Weak jobs market leads to big interest rate cuts
Bank of America
“Falling US job openings = weaker labor market = lower Fed funds rate. Yield curve likely to steepen very dramatically next six to 12 months as Fed cuts ahead of election but long-end downside inhibited by inflation and fiscal shenanigans,” BofA said.
11. Stocks dropped after last Fed rate hike in inflationary periods
Bank of America
“Our view: Sell the last rate hike. Investors too optimistic on rate cuts and not pessimistic enough on recession. ‘Sell the last hike’ was correct strategy for stocks in inflationary ’70s/’80s, ‘buy the last hike’ worked in the ’90s disinflationary market,” BofA said.
12. Stocks and recessions don’t mix well
Bank of America
“Recessions reliably negative for equities throughout history and insufficiently discounted in advance. Plenty of room for more S&P 500 downside,” BofA said.
TORONTO – Strength in the base metal and technology sectors helped Canada’s main stock index gain almost 100 points on Friday, while U.S. stock markets also climbed higher.
The S&P/TSX composite index closed up 93.51 points at 23,568.65.
In New York, the Dow Jones industrial average was up 297.01 points at 41,393.78. The S&P 500 index was up 30.26 points at 5,626.02, while the Nasdaq composite was up 114.30 points at 17,683.98.
The Canadian dollar traded for 73.61 cents US compared with 73.58 cents US on Thursday.
The October crude oil contract was down 32 cents at US$68.65 per barrel and the October natural gas contract was down five cents at US$2.31 per mmBTU.
The December gold contract was up US$30.10 at US$2,610.70 an ounce and the December copper contract was up four cents US$4.24 a pound.
This report by The Canadian Press was first published Sept. 13, 2024.
OTTAWA – Statistics Canada says wholesale sales, excluding petroleum, petroleum products, and other hydrocarbons and excluding oilseed and grain, rose 0.4 per cent to $82.7 billion in July.
The increase came as sales in the miscellaneous subsector gained three per cent to reach $10.5 billion in July, helped by strength in the agriculture supplies industry group, which rose 9.2 per cent.
The food, beverage and tobacco subsector added 1.7 per cent to total $15 billion in July.
The personal and household goods subsector fell 2.5 per cent to $12.1 billion.
In volume terms, overall wholesale sales rose 0.5 per cent in July.
Statistics Canada started including oilseed and grain as well as the petroleum and petroleum products subsector as part of wholesale trade last year, but is excluding the data from monthly analysis until there is enough historical data.
This report by The Canadian Press was first published Sept. 13, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in the base metal and energy sectors, while U.S. stock markets were mixed.
The S&P/TSX composite index was up 172.18 points at 23,383.35.
In New York, the Dow Jones industrial average was down 34.99 points at 40,826.72. The S&P 500 index was up 10.56 points at 5,564.69, while the Nasdaq composite was up 74.84 points at 17,470.37.
The Canadian dollar traded for 73.55 cents US compared with 73.59 cents US on Wednesday.
The October crude oil contract was up $2.00 at US$69.31 per barrel and the October natural gas contract was up five cents at US$2.32 per mmBTU.
The December gold contract was up US$40.00 at US$2,582.40 an ounce and the December copper contract was up six cents at US$4.20 a pound.
This report by The Canadian Press was first published Sept. 12, 2024.
